TDD settles tax dispute with store

Jacob Barker

Saturday

May 25, 2013 at 12:01 AMMay 25, 2013 at 1:00 AM

If you shopped at the Columbia Menards in the six months after it opened, you'll be happy to know that you got a tax break.

Columbia shoppers probably didn't realize it, but then, neither did Menards, the city or the district that levies a special tax in the store until Menards had already been operating for months. Even though it wasn't that much — 0.5 percent on Menards sales that the district estimates was worth around $70,000 — the taxing district and Menards have been wrangling over it for years.

A settlement agreement authorized yesterday seems likely to close a dispute that has been simmering since the city realized it wasn't collecting the 0.5 percent tax in October 2009.

The CenterState Transportation Development District board of directors voted yesterday to settle with Menards for $45,000. The district's executive director, attorney Robert Klahr, said the amount was "probably greater than 50 percent of the sales taxes that would have been collected" between the time Menards opened on March 30, 2009, and when it began collecting the special half-percent tax on Oct. 15, 2009.

The district, known as a TDD, was set up in 2002 on the land in northeast Columbia that is now home to a shopping center anchored by Bass Pro Shops and Menards. Like the nine others established around Columbia shopping centers, the TDD collects sales taxes to finance infrastructure projects necessitated by the commercial development. Missouri law allows property owners to set them up, levy the taxes and pay for the road projects they want to build.

The government's involvement, in this case the city of Columbia, generally is limited to collecting the tax and remitting it to the TDD.

The dispute between CenterState and Wisconsin-based Menards arose because Menards said it was never told it had to collect the extra sales tax. The city and the TDD said it was, and either way, state law required it.

"The collection did not begin when Menards first opened, but when there was follow-up communication from the city, Menards did begin collecting sales tax at that time," Klahr said at yesterday's CenterState board of directors meeting.

The district estimated it was owed around $70,000, but TDD board member Chad Hager said that with penalties and interest, the amount owed could have been hundreds of thousands of dollars. Rather than spend a bunch of money on attorney's fees in litigation, Klahr said the board decided to settle and take less than what it thought the sales tax take would have been.

Hager, an agent with United Country Real Estate, said the terms of the TDD were in the real estate contract.

A large company such as Menards might not have seen the terms when a new division took over setting up and operating the store. Plus, the decentralized oversight of TDDs puts enforcement largely on developers and their attorneys, who only hold formal meetings a couple of times a year.

However it happened, Menards balked at the idea of paying sales taxes it didn't collect out of its own pocket, according to previous board minutes. Menards' attorneys noted in previous TDD meetings, according to minutes, that the district's millions of dollars in outstanding bonds would be repaid one way or another and the amount wouldn't have "a material impact" on repayment. Klahr replied that some subordinate note holders, such as the city of Columbia, would benefit from the extra sales tax money.

CenterState was Columbia's first TDD, and the city financed part of the Vandiver Road and Highway 63 interchange for the initial developer. The TDD is supposed to eventually repay the city.

In a statement yesterday, Menards said it was "surprised" the city asked it to begin collecting additional sales taxes in late 2009 because "we had been collecting exactly what the city told us to collect."

"We're disappointed that we have to pay an additional $45,000, but on the other hand, glad that it's behind us," the statement said. "Hopefully all parties concerned learned from this to communicate a little bit better."

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